Nov. 8, 2000 -
A dispute between Rocky Mountain HMO and state officials over Medicaid payments could cost Colorado hospitals and taxpayers millions of dollars, some health care executives fear.

Jim Rizzuto, Colorado Department of Health Care Policy and Financing director, said last month the state would drop Rocky Mountain, the largest HMO on the Western Slope, from its Medicaid managed care program Jan. 1 after the two failed to reach an agreement on reimbursement rates for 2001. Colorado pays Medicaid HMOs including Rocky Mountain 95 percent of what it estimates is the cost of treating Medicaid patients who aren't in HMOs.

The state paid Rocky Mountain $60 million during fiscal year 1999 - but would have to pay an estimated $3 million more if the HMO's Medicaid coverage is dropped next year, forcing members into fee-forservice care, said Bernie Buescher, former director of the Department of Health Care Policy and Financing and a board member of St. Mary's Hospital in Grand Junction.

He said hospitals from Grand Junction to Denver could lose much more.

"If it falls apart now they'll (hospitals) get paid less," he said. "And a lot of these folks, if they fall into fee-for-service, will end up in ER's, the most expensive part of the health care system." Rocky Mountain chief executive officer Mike Weber has questioned the accuracy of the state's proposed payments to Medic
aid HMOs, complaining that they are too low.

Rizzuto said the rates are accurate and sufficient and the state shouldn't be bullied by HMOs to raise them.

He said HMOs may not be the best way to trim Colorado's burgeoning Medicaid budget and get quality health care to lowincome residents. The Health Care Policy and Financing Department has worked dilligently to cut costs in the fee-for-service program and the state is considering alternatives such as giving counties block grants of Medicaid money to manage on their own and awarding vouchers directly to Medicaid members who would purchase commercial health insurance, he said.

"HMOs weren't the silver bullet," said Rizzuto. "We are really at a critical time where we have to go back and analyze them. I think it's time to look at the cost increases in fee-for-service and the cost increases in HMOs." A federal judge has temporarily stopped the state from dropping Rocky Mountain from its Medicaid program until Monday.

In the meantime, the court is evaluating the state's 2001 Medicaid rates to determine whether they are legal.

Weber has said he will fight to keep Rocky Mountain's 24,000 Medicaid HMO members from being forced back to Medicaid's traditional fee-for-service plan, which lacks preventive health programs such as prenatal care, cholesterol screenings and diabetes management.

But the state's reimbursement rates are $3 million to $6 million below what it will cost Rocky Mountain to provide medical care to Medicaid patients, making it dif
ficult for the HMO to remain in the program, Weber has said.

Medicaid is a health benefits program for low-income and disabled individuals funded jointly by federal and state funds.

St. Mary's, Delta County Memorial Hospital and Montrose Memorial Hospital on Colorado's Western Slope treat large numbers of Rocky Mountain Medicaid HMO patients.

Buescher estimates St. Mary's alone stands to lose $2 million to $3 million if Rocky Mountain drops out of the Medicaid program because the HMO pays the hospital at a higher rate than the government does under its fee-for-service program.

In addition, Medicaid patients who lose their primary care doctor are likely to show up in the emergency room with untreated illnesses, a costly alternative for hos
pitals, he said.

About half of Rocky Mountain's Medicaid HMO members across Colorado see primary care doctors who don't accept traditional Medicaid patients, and would have to find new doctors if Rocky Mountain exits the market, Weber said.

HMOs save money by encouraging Medicaid patients to see their family doctors frequently and thus catch injuries and illnesses early, before they turn into expensive hospital stays. The health plans can then pass those savings on to hospitals and doctors by paying them more than traditional Medicaid, said Len Dryer, chief financial officer at The Children's Hospital in Denver. One-third of Children's patients are Medicaid beneficiaries. "If the state keeps cutting Medicaid dollars to hospitals, I think we'll be a lot worse off in the long run" without Medicaid HMOs, said Dryer.

Hospital executives on the Western Slope also are concerned about Medicaid patients losing their HMO. "Our biggest concern is that if the plan changes dramatically and our physicians decide not to participate, Medicaid patients are going to show up in the ER," said Ken Platou, CEO of Montrose Memorial Hospital.

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